forced to shut down, a possibility that left the two chain chiefs in dis- belief. “No f---ing way we’re closing our restaurants,” the other CEO barked. A few days later, state after state issued emergency orders that din- ing rooms be shut until further no- tice. “Chuck E. Cheese was one of the largest pizza companies in the world at the time, but we didn’t know how to sell pizza,” McKillips says. “We weren’t set up to do delivery or take- out. We had to learn overnight how to operate like a pizza chain.” Part of the remedy was launch- ing a virtual pizza brand called Pasquale’s Pizza & Wings, named of course after Chuck E. Cheese’s animatronic associate Pasqually P. Pieplate, the drummer in Chuck’s house band. Yet the Chuck E. Cheese busi- ness model posed problems not encountered by Pizza Hut or Dom- ino’s. The games-and-grub operation generates 15% to 20% of its reve- nues by hosting kids’ birthday par- ties onsite. That sales stream dis- appeared, taking with it the brand’s most-effective marketing tool. On average, nine friends of the birthday boy or girl participate in the restau- rant festivities, and many of them subsequently hound mom and dad to book their own parties there, or at least bring them for visits now and again. “It is normally the introduction to the brand for millions of kids ev- ery year,” says McKillips. “We lost brand awareness for almost three years.” Even when states started allow- ing dining rooms to re-open, Chuck E. Cheese faced problems unique to the brand. New York and other ju- risdictions only permitted consum- ers who’d been vaccinated to enter a restaurant. The pizza chain’s typ- ical customer was under age 5, and some health officials questioned the need to vaccinate children that young. Some public figures advised against it for health reasons.
All told, no more than 33% of U.S. children had been vaccinated against COVID by the time the pan- demic officially ended, according to the Centers for Disease Control and Prevention. IS A SALE POSSIBLE? Like other restaurant operations offering games or other experienc- es beyond a meal, sales rebounded for CEC post-pandemic. Aware- ness is also rebuilding, in part be- cause Chuck E. Cheese is advertis- ing again, but “it takes time,” says McKillips. In December, reports surfaced that CEC was ready to sell the Chuck E. Cheese brand or the com- pany in its entirety, with the fami- ly-focused game-and-food concept Dave & Buster’s cited as one of the interested parties. But nothing transpired. “We did kick the tires and ex- plored some opportunities but didn’t feel the time was right,” says McKillips. “Right now, we are fo- cused on our brands and aren’t ac- tively seeking any sort of deal. We have a lot of long-term strategies that are still unfolding, and we need to give them time to fully deliver re- sults.” Plus, the company hasn’t been immune to the consumer skittish- ness that’s dampened restaurant traffic this year. “We know from our research that a young family is going to be spend- ing $200 to $300 a month, total, on entertainment,” says McKillips. “Macro conditions are the biggest challenges we face right now.” NEW PRICING MODELS Chuck E. Cheese is countering the heightened sensitivity to value among its core clientele by adopt- ing subscription pricing. An original come-on of unlimited visits during the summer at $7.99 a month has been expanded to a year-round of- fer. Now parents can opt for two other pay-one-price offers that enti- tle their kids to more game playing. The youngsters can play games
anywhere from 40 to 250 times per month depending on which tier mom or dad chooses, with a top price of $29 a month for a mini- mum commitment of a year. Or, if they’re just looking to keep the youngsters occupied during school vacation, parents can opt for a two- month Fun Pass at different levels, with prices ranging from $49.99 to $139.99. The big change for all the tiers, says McKillips, is the addition of a discount on food and beverage pur- chases. The price breaks range from 20% to 50% off, depending on the subscription tier. “We’ve just sold our 400,00th two-month pass,” says McKillips, though it wasn’t clear if that was across all price tiers or merely the $7.99 option. It’s a model that’s little-known in the restaurant business but com- mon in the theme-park industry, offered by players ranging from The Walt Disney Co. to small, local fam- ily entertainment centers. If McKillips has his way, it’ll be one of the innovations that helps CEC recapture momentum. He knows the brand has already passed one key test. McKillips’ two children are both students at the University of Alabama, far outside the targeted age bracket of Chuck E. Cheese. Yet what pizza are they eating these days with their frater- nity brothers? “They go to a Chuck E. Cheese and take a bunch of pizzas back to their house,” says McKillips. “The pizza is now a family tradition.” overnight how to operate like a pizza chain.” - DAVID MCKILLIPS, CEO OF CHUCK E. CHEESE “We weren’t set up to do delivery or takeout. We had to learn
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OCTOBER 2024 RESTAURANT BUSINESS
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